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Course: Financial Literacy > Unit 3
Lesson 2: Credit cards- What is a credit card?
- Choosing a credit card: credit card types
- Choosing a credit card: what to look for
- Schumer boxes and the things you should know about your credit cards
- Understanding credit card terms
- Which credit card is better for you?
- Credit cards
- Credit cards: the good and the bad
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Choosing a credit card: credit card types
Learn about how to choose the best credit card for your lifestyle.
Different types of credit cards
When it comes to credit cards, there are quite a few different types to choose from. Each type of card comes with its own set of features and benefits, so it's important to think about what's most important to you before selecting one.
Standard credit cards
These are the most basic credit cards. They have a credit limit, which is how much you can spend. You have to pay back what you spend, plus interest, which is a fee for using the credit. You can pay the full amount or a part of it every month. Some standard credit cards have annual fees, which are charges you pay every year to use the card.
Rewards credit cards
These are credit cards that give you some benefits for using them, such as points, cash back, miles, or discounts. You can use the benefits for things like gift cards, merchandise, or travel. Rewards credit cards may have higher interest rates or annual fees than standard credit cards, and they may have rules or limits for the benefits. They are a great choice for people who are disciplined about paying off their balances each month.
Secured credit cards
These are credit cards that need you to deposit some money as a guarantee that you will pay back what you spend. The deposit is usually the same as your credit limit. You can get the deposit back when you stop using the card or switch to a regular credit card. Secured credit cards are for people who have no credit or bad credit, and want to improve their credit score.
Student credit cards
These are credit cards for college or university students. They usually have lower credit limits and interest rates than regular credit cards. Student credit cards can help students build and keep a good credit history, which can help them after graduation. But students also have to be careful not to spend too much or miss payments, as this can hurt their credit score and cause debt problems.
Business credit cards
These are credit cards for business owners or employees who need to pay for business-related expenses, such as travel, supplies, or equipment. They usually have higher credit limits and interest rates than personal credit cards, and they may offer some benefits, such as rewards, cash flow, or tax deductions. Business credit cards can help separate personal and business finances, and track and manage spending.
Store credit cards
These are credit cards that are issued by specific retailers, such as department stores, gas stations, or online shops and they can only be used at those retailers. They usually have lower credit limits and higher interest rates than other credit cards, but they typically offer some benefits, such as discounts, coupons, or loyalty points.
As you can see, there are many different types of credit cards to choose from. Consider your spending habits and your financial goals to help you choose the card that's right for you.
Want to join the conversation?
- "Rewards credit cards are cards that give you some benefits for using them, such as points, cash back, miles, or discounts" What does "miles" mean in this context?(15 votes)
- "miles" comes from the rewards once given by airlines to frequent flyers. Once you had flown, say, 20,000 miles, you might get a free ticket.(25 votes)
- the best way to gain credit before using a credit card.(11 votes)
- Take out a loan and pay it back on time, credit=responsibility(1 vote)
- What would be a good credit card for someone just starting out? They all have their benefits and disadvantages, but what is the best for a first-job income?(5 votes)
- The best thing you can do is get off of your computer and go visit your bank. Talk to one of the kind people there. After you've used that first card for two years, use what you have learned to "shop around." You may discover that what you already have is good enough.(7 votes)
- Por que dan cheques y no el dinero en la tarjeta?(6 votes)
- lo hacen porque la tarjeta de crédito es dinero que está tomando prestado del banco, por lo que cuando ingresa un cheque, está pagando lo que ha pedido prestado y está pagando una tarifa. pero con una tarjeta de débito estás sacando dinero de tu cuenta de ahorros para que puedas poner todo el dinero que quieras. ¿Entiendes lo que estoy tratando de decir?(4 votes)
- Im in my freshman year of college and I have never had a credit card. I’m not sure if I want one now, but what would be the ideal one I would get for someone who has no credit history or no credit score?(2 votes)
- #1: When each of my kids started college, I got each of them a credit card in a joint account with me, and a low limit on how much could be charged on it (about $500). I encouraged them to use the card and make the payments for what they charged, and I'd be there if they ever got in trouble (but I limited my exposure to their potential bad decisions to $500). This was like having training wheels on a bicycle. HOWEVER, they were not able to build a credit score on this basis. After a year or two on that leash, we (together) asked the issuing bank to take my name off of the account. By then they were familiar with the system and didn't need me on the accounts as "backup" any more. Their credit scores began to be built. There hasn't been a problem. Now they are in their 30s. Should either of them get into a fix, I'm sure their mother and I would help them get out of it. Otherwise, we have nothing to do with how they run their personal financial situations.(10 votes)
- Do all banks offer the types of credit cards as described in the article?(2 votes)
- Most banks in the USA will have something like this. Many credit unions will, too. Talk to the bank that is most convenient to you.(6 votes)
- If you pay your credit card bill in full and on time, will the interest rate apply?(3 votes)
- It should not apply if you do those things. If you are charged interest, though, a phone call to the customer service number will likely get things sorted out, or explained.(3 votes)
- can I earn credit before using a credit card?(2 votes)
- Another learner here taught me about a credit builder loan, just yesterday! That was new to me, but it has been around for a long time. You go to your bank and ask for this. Basically, the bank loans you some money and puts it into a "locked" account. You can't use that money until you pay off the loan. The record of taking a loan, and paying it back, helps you to earn positive points on your credit score. SO, go to your local bank and ask for a Credit Builder Loan, and see what they can do for you.(4 votes)
- para que los cheques si existen las tarjetas (>~<)(2 votes)
- Puede obtener efectivo, solicitar un cheque o realizar una compra en cualquier lugar con tarjetas de débito VISA.(3 votes)
- Can a student credit card be turned into a standard credit card? What about the other way, standard into student?(2 votes)
- Visit your banker, who can help you sort out how to do things. All kinds of good things can happen when you get the information straight from the bank.(4 votes)